How can you prove expenses in an audit if you did not keep good records?
- September 19, 2017
- David Greene
- Comments Off on How can you prove expenses in an audit if you did not keep good records?
As you know, if you are audited the IRS will not accept your word for income or expenses. If they think you underreported income, they will go through all of your financial accounts and add deposits to determine income. It will be up to you to show if some of these deposits were not actually income. For expenses, they want to see backup documents. If you did not keep receipts, perhaps you can go back through your bank statements and mark the relevant payments. Another thing to do is visit the companies involved and ask for duplicate receipts. I can help you with the audit and make other suggestions. For the future, IRS Publication 552 gives guidelines for keeping records and how long to keep those records. It suggests keeping most records at least 3 years, and some, such as those involving real estate, even longer.